Carried Away

3 New Spaceports in 3 Days -- Spaceport America (Truth or Consequences)

Two weekends ago, I went to the 2006 X Prize Cup in Las Cruces, New Mexico, and just returned to work today.  Since El Paso, Texas is about an hour's drive away from Las Cruces and was cheap and easy to fly into, I made it my center of operations for the weekend.  El Paso is an industrial town that dominates the economic life for hundreds of miles around.  It was my good fortune that two new spaceports -- Spaceport America 25 miles Southeast of Truth or Consequences, New Mexico and Blue Origin's spaceport 20 miles North of Van Horn, Texas  -- were within easy driving distance when I had some time to visit during the margins of the Cup activities.

Truth or Consequences is a hard-luck desert town of 7,000 roughly equidistant from El Paso and Albuquerque, New Mexico.  The downtown probably saw its best days in the 1950s and half of the downtown shops are vacant.  There appear to be several motels, although the construction of most of them is from a prior age.  Truth or Consequences is said to have some hot springs and the town seems to pull in visitors from several tens of miles around.  It is probably because of this fact that I was able to find a good steak at a nice (not fancy) sit-down restaurant.

Waiters are sometimes good sources of informal information.  My waiter was well-informed about the spaceport that is coming nearby and mentioned UP Aerospace's recent launch failure.  He said that most of the local schoolchildren had made the trip down to Las Cruces for the Cup and I noticed that the restaurant's community bulletin board had a small poster for the event.  Also, he said that a week before, he was interviewed by a local TV station for his thoughts about the spaceport, a Wal-Mart, and a race track moving into town.  All three were markers of economic progress for the town.

Spaceport America will be Southeast of town on the other side of the Elephant Butte Resevoir, next to the White Sands Missile Range.  I drove out New Mexico Route 51 to Engle, a crossroads where the modern world ends.  Once you drive over the railroad tracks, there is a short line of ranch mailboxes and a sign at the side of the road that says that beyond this point, the roads are not maintained by the state.  The roads to the East are plain dirt -- no gravel in sight.  There is a paved road South from Engle beside the railroad tracks along which I drove several miles.  Apparently, the spaceport will be near a crossroads called Upham, several miles South along that paved road.  But to attach the spaceport to a landmark seems to be somewhat arbitrary.  There is little in this desert besides the railroad tracks, desert brush, and a very occasional cow.  It seems a good place for a spaceport.  It has ready railroad access.  But the roads are not heavy duty.  Route 51 has some 10 ton limit stretches, for instance.

(Looking from NM Route 51 Southeast toward Spaceport America.)

In a very unfortunate bit of history and spaceport place naming, Spaceport America is situated in the Journey of the Dead.  Why oh why didn't they name it the Journey to Heaven? Next to the town of Truth or Consequences, the Journey of the Dead brings up lots of uncomfortable thoughts of impending mortality!

(Spaceport America at the Journey of the Dead)

Traveling through this area, it struck me how much of a gamble Spaceport America is for New Mexico.  The spaceport is slated to cost $225 million and the future is not at all assured.  That said, the payoff could be large for a small town down on its luck like Truth or Consequences.  New Mexico has a budget surplus, and Governor Richardson decided to speculate on the future with a portion of the money.   To be honest, I would have cut taxes instead, but his gamble is interesting.  Richardson could be running for president in '08 and I wonder how this strategy will be perceived by the electorate?

In any event, I had a pleasant visit to the area where Spaceport America will be located and I encourage you to make a visit to see for yourself.

Buying a House in the City Versus Driving

Today, the Washington Post (free registration) has a good article about the costs of buying a place in the suburbs and having a long commute versus buying a place in the city and having a short commute.  The article is based on a report by the Center for Housing Policy.  As some of you know, I moved from Gaithersburg, a Washington suburb, into the city because of the hassles of commuting.  But the expenses of commuting are real as well.  At the time, parking in the city cost $6 to $8 a day (now it costs $10 or $11).  My car was a beater, so there were maintenance costs.  Gasoline was an additional expense.  I no longer own a car and have a 10 or 15-minute walking commute.

Barbara J. Lipman, an author of the study, said that people tend to focus on all the zeroes that differentiate the price of a closer-in house from one in the outer suburbs, but they don't realize how much they're spending on commuting costs, such as gas, tires and insurance.

"Even if you save a couple of hundred dollars a month on your mortgage, it doesn't nearly outweigh the costs of the cars you are driving," she said.

The average cost of owning a 2006 Toyota Camry and driving it 15,000 miles a year with gas at $2.40 a gallon works out to $7,967 a year, according to AAA.

The $7,967 annual expense for commuting via a Toyota Camry seems a little high, but not by too much.  Also, I chuckled while reading the quote about saving "a couple hundred dollars a month" by commuting.  Four or five years ago, you might have been saving only a couple hundred dollars a month by commuting from the suburbs, but in the meantime, prices for real estate in the city have mushroomed such that the differential in carrying costs (mortgage, insurance, etc.) between the suburbs and the city has grown substantially.  Furthermore, the marginal price of buying space in the city does not decrease quickly -- e.g., you do not get much of a discount per square foot for buying a 3 bedroom condo versus a 1 bedroom condo.  This might factor into housing decisions made by families, especially large families.

Interestingly for personal finance, the article ends with the following...

"A three-car family puts a lot of money into depreciating assets, instead of into mortgages and college educations," [Stewart Schwartz, executive director of the Coalition for Smarter Growth] said.

This is a very important fact.  Cars last much longer than they used to, but after a decade or so of use, a car is ready to be shipped to Africa.  Land is a perpetual asset and does not depreciate.  A house is useful for 75 years or longer and a college education is useful for 50 or 60 years.  Inasmuch as a household has enough cash flow to maintain the monthly carrying costs and has enough assets to cushion a cash flow shock, it is much better to spend on assets with longer useful lives.

EELV Monopoly Approved -- Should We Care?

There have been several private space news items over the last month that warrant attention:  (1) Robert Bigelow's announcement about the schedule and details for his space station devolopment; (2) Robert Bigelow's announcement that he is working with Lockheed-Martin to study the feasibility of manned flights on the Atlas V; and (3) the approval of the Boeing-Lockheed-Martin EELV (military/intelligence expendable rocket) launch monopoly.

With regard to the Boeing-Lockheed-Martin EELV launch monopoly, I have never understood what Lockheed-Martin hoped to gain by entering into the joint venture and enduring the distraction of changes in its manufacturing chain.  Manufacturing of Lockheed-Martin's Atlas V and Boeing's Delta IV rockets is to be consolidated at Boeing's Delta IV plant in Decatur, Alabama.  Further, due to a pricing scandal, Boeing has had trouble obtaining orders from the military through the program, leaving Lockheed-Martin the lion's share of business.  Lastly, if the military were wishing to downselect from two rocket models to one, the Atlas V would be the surviving model.

(Lockheed-Martin's Atlas V)

Also, I have wondered why the military would allow the joint venture.  It is true that both of these rockets are underutilized.  Each rocket has launched only two payloads this year.  All things equal, combining the efforts of the two rocket programs would save on fixed costs.  However, I am very skeptical that costs will be reduced overall.  In a cost-plus contracting environment, a company is constrained on cost only by its competition in the market and its reticence to ask for more money from the government.  Boeing and Lockheed-Martin are no blushing virgins when it comes to asking for more money, so removing the competition between the two programs would only serve to uncap the cost demands.

In the end, I think the significance of the joint venture to private space launch may become minimal.  If SpaceX can execute its business plan, then the need for the EELV program may be called into question.  Lockheed-Martin may be able to sustain the political support for Atlas V for a while, but the difference in price between Atlas V and SpaceX's Falcon 9 eventually should lead the military to phase out the EELV program.  To be sure, a half dozen launches per year or so would be a golden piece of business for SpaceX in the medium term, but its order book is healthy in any event.

Personal Finance

I have decided to post some thoughts about personal finance in this blog.  The subject has been a favorite of mine for a long time, and it sits at the center of several topics such as economic and demographic trends, managing a family, psychology, and building and maintaining close relationships.  As an example, children are no longer net economic assets to their parents, but rather a series of very large expenditures.  In this world, the value of managing this series of expenditures versus available resources is high, especially if the family is large.  Mismanaging the expenditures may lead to stress, bankruptcy, failure of marriages, and low individual prospects.

In this changed world, it seems worthwhile to raise our level of thinking on the subject and to challenge what we think we know.  I am not looking for the one true approach that would put our lives in straight-jackets of long-term planning.  Rather,  the goal is to play a smart game that would tend to maximize our happiness in the world in which we live.